Question: You are a venture capitalist and have been approached by Cirrus Electronics, a private firm. The firm has no debt outstanding and does not have

You are a venture capitalist and have been approached by Cirrus Electronics, a private firm. The firm has no debt outstanding and does not have earnings now but is expected to be earning %15 million in four years, when you also expect it to go public. The average price-earnings ratio of other firms in this business is 50.

A. estimate the exit value of Cirrus Electronics

B. If your target rate of return is 35%, estimate the value of Cirrus Electronics.

C. If you are contributing $75 million of venture capital to Cirrus Electronics at a minimum what percentage of the firm value would you demand in return?

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